Moody's places Hungary's CIB Bank on review for possible downgrade

Tuesday, January 27, 2009, 14:07

Moody's Investor Service announced on Tuesday that it has placed Hungary's CIB Bank's long-term local currency deposit and debt ratings of Aa3 and bank financial strength rating (BFSR) of C- on a review for possible downgrade.

Moody's affirmed CIB Bank's long-term foreign currency deposit rating of A3 with a negative outlook as well as its Prime-1 short-term local currency and Prime-2 short-term foreign currency deposit ratings.

The review of CIB Bank's BFSR of C- will focus on the impacts of the weakening operating environment in Hungary on the bank's financial fundamentals. Moody's expects the bank's profitability to be significantly affected by increased funding costs, higher provisioning needs due to weakening asset quality and a potential decline in revenue generation as the economy slows. Moody's said that it anticipates deterioration in asset quality to be the main driver of the expected decline in the bank's profitability in the coming period, given CIB Bank's focus on corporate banking, and its significant exposure to project finance (primarily commercial real estate) and leasing that together account for approximately 43% of its loan portfolio, and the large share of foreign currency loans in its portfolio.

CIB Bank's liquidity and capital position is supported by Italy's Intesa SanPaolo (rated Aa2/P-1/B-), which holds 100% of the bank's share capital and is the main provider of its market funding. Moody's cautions that, although the parent can provide the bank with funding in euros, the large share of Swiss franc-denominated loans creates currency mismatches on the bank's balance sheet that have become more expensive and difficult to hedge in recent months.

Moody's has also placed on review for possible downgrade CIB Bank's long-term local currency debt and deposit ratings of Aa3, as these ratings would be negatively affected in the event of a potential downgrade of the BFSR. The bank's debt and deposit ratings are supported by the rating agency's assessment of the probability of parental and systemic support as very high in the event of need. The A3 long-term foreign currency deposit rating is on negative outlook as it is constrained by Hungary's A3 foreign currency deposit ceiling, which also carries a negative outlook.

Moody's issued its previous rating action on CIB Bank on November 7, 2008, when its foreign currency deposit ratings were downgraded to A3 (negative outlook)/Prime-2 from A2 (stable outlook)/Prime-1 as a result of a sovereign rating action that resulted in the downgrade of Hungary's ceiling for foreign currency deposits to A3 (negative outlook) from A2 (stable outlook). (MTI – Econews)

Related articles

Agricultural producer prices overall remained unchanged in June 2018 compared to June 2017, resulting from an increase of 3.5% in the average price of crop products and a decline of 5.6% in prices of livestock and animal products, the Central Statistical Office (KSH) reported on Tuesday.

Hungaryʼs government has discussed a ban on skyscrapers in Budapest to preserve the traditional profile of the capital. However, the ban would not apply to the planned office building of national oil and gas company MOL.

Low water levels on the Danube have reduced freight capacity on the stretch of the river that runs through Hungary by two-thirds. High temperatures in August and drought have severely lowered the Danube water level, now at 93 centimeters in Budapest.

In the second quarter of 2018, gross domestic product (GDP) in Hungary rose by 4.4% according to seasonally and calendar-adjusted and reconciled data, the Central Statistical Office (KSH) said in a flash report released on Tuesday.

The main reason for real estate acquisition in Hungary is investment, according to a recent study by real estate broker Duna House. Interestingly, entrepreneurs ranked only second as the most active buyers of property.

Forint liquidity of Hungaryʼs banking sector narrowed in July from a month earlier, which was mainly reflected in a decrease in the average stock of one-day deposits, the National Bank of Hungary (MNB) said in a report based on preliminary data on Monday.

One-fifth of Hungarian pensioners, or about half a million people, would be willing to take a job, shows a survey carried out by the GKI economic research institute in June 2018, cited by state news agency MTI on Monday.

In June 2018, the volume of industrial output in Hungary grew by 4.2% year-on-year, according to a second estimate of data by the Central Statistical Office (KSH), confirming the headline figure released on August 8. Based on working day-adjusted data, production rose by 3.1%.

Real estate developer and investment company Wing Zrt. announced on Friday the sale of the MOM Park shopping mall and office property building complex in Buda. The value of the transaction has not been disclosed.